What Can Modern Contract Management Processes and Tools Do for the Enterprise?

Today’s article is the second in a series of articles centered on our Collaborative Contract Management report, sponsored by Iasta, and available for download here.

In 2015, contract management has evolved from the back office, manual, time-intensive process that it was for so long into an automated, efficient, and innovative process that can drive greater collaboration inside and outside of the enterprise. Modern contract management solutions that leverage innovative features, such as digital contract authoring and editing, central repositories, straight-through processes, electronic signatures, alerting and reporting, and mobile applications, drive greater stakeholder engagement and collaboration. With increased collaboration and engagement comes enhanced visibility, standardization, and compliance of the overall contract management process, which as Best-in-Class procurement teams show, correlates with greater enterprise-level performance. But how? And what kind of performance?

Collaboration

Collaboration is the name of the game in 2015, with more Chief Procurement Officers (CPOs) and procurement teams realizing that they cannot go it alone when it comes to processes like contract management that touch other stakeholders – both internal and external. That is why in survey of nearly 250 CPOs and other procurement leaders, Best-in-Class CPOs and procurement teams that leverage modern, automated contract management solutions also report a greater ability to collaborate with internal stakeholders (like legal departments) and external stakeholders (primarily suppliers). Contract management features that enhance collaboration, such as digital contract authoring and editing, allow multiple stakeholders, like contract managers, legal staffers, and supplier representatives, to engage in the contract execution process quickly and efficiently.

Also, being able to access contracts and related documents in a central, searchable repository allows enterprise buyers to leverage existing contracts with preferred suppliers rather than engage in off-contract (maverick) spend and jeopardize the value that procurement negotiated with preferred suppliers during the sourcing phase. Leveraging electronic signatures and automated workflows allows all stakeholders to send documents on their way and overcome what would have been painful bottlenecks. And mobile applications foster even greater collaboration by allowing stakeholders and decision makers to approve, edit, and execute contracts on any mobile device, from anywhere there is an internet connection.

Standardization

Modern, automated contract management solutions also foster greater standardization of contract management and governance, risk management, and compliance (GRC) processes, as Best-in-Class procurement teams report greater standardization of both. Standardizing contract documents, clauses, and language and storing them in a central, searchable repository can enable faster and more efficient reuse of the documents and language for future contract cycles. It can also reduce the number of errors that inevitably occur when new documents and language are crafted. Lastly, standardizing the contract management process also allows greater interoperability with the sourcing process, allowing contract managers to pull in sourcing documents from the sourcing phase and convert them to contract documents for fast, accurate, and seamless execution.

Greater Best-in-Class standardization of contract management processes goes hand-in-hand with greater standardization of GRC processes. For starters, procurement teams that ensure closer alignment between the sourcing and procurement phases can drive greater compliance to contract terms and conditions by both parties. Ensuring that enterprise buyers are leveraging existing contracts to procure approved goods and services, and that preferred suppliers are delivering them at the established price, terms, and conditions helps reduce risk of contract non-compliance by both parties. In doing so, it reduces the risks to the enterprise of maverick/off-contract spend, supplier renegotiation of terms and conditions, savings leakage, non- or under-performing suppliers, and even regulatory or reputational risk.

Visibility

Lastly, Best-in-Class procurement teams that deploy automated, innovative contract management solutions also report a greater ability to gain visibility into many aspects of the contract management process, which is so vital to the health of the enterprise. Reporting and alerting features allow CPOs and procurement teams to set pre-determined thresholds for contract expiration, allowing them to be notified 90, 60, or 30 days out and decide whether to renew, amend, or “sunset” a contract. Best-in-Class teams also gain visibility into the status of contract authoring or execution, allowing them to know whether or where bottlenecks have occurred and to be able to take the appropriate action.

Lastly, Best-in-Class visibility in contract management allows them to see compliance rates (internal and external), and to understand whether the enterprise and its suppliers are meeting or exceeding expectations. A CPO cannot fix what it cannot see; automated, innovative contract management solutions provide the visibility into these aspects of the contract management process that allows CPOs to take action if and when needed.

Superior Performance

Best-in-Class procurement teams that leverage modern, automated contract management tools report greater capability to collaborate internally and externally, standardize contract management and GRC processes, and gain visibility into contract status, adherence, and performance. Collectively, this greater capability runs in parallel with Best-in-Class teams reporting 35% more spend that is contract compliant and 37% greater realized savings, demonstrating that collaboration is more than just a buzzword.

By leveraging collaborative contract management processes and tools, Best-in-Class procurement teams can drive greater stakeholder engagement throughout the process – from sourcing, contract negotiation, and creation – and expedite it for fast and seamless execution. Once executed, Best-in-Class teams can lean on standardized processes to ensure that they are not re-creating the sourcing and contracting wheels every time there is an enterprise need, saving time and money. And by gaining visibility into each process and sub-process, they can ensure that internal and external stakeholders are adhering to contract terms and delivering and performing as intended, and make smarter business decisions vis-à-vis contract expiration/renewal. This can all translate into greater on-contract spend, greater contract compliance, mitigated supplier risks, and superior enterprise performance. It certainly has for Best-in-Class procurement teams.

Want to learn more? Click here to download the full report, brought to you by Iasta.

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